As per the compilation of analysis by the Reserve Bank of India, in every four hours one banker is caught and punished for being involved in fraud. The number of bank frauds had risen from Rs 1,542.8 crore (Rs 15.42 billion) in 2008-2009 to Rs 22,469.6 crore (Rs 224.69 billion) in 2017-2018.
John Maynard Keynes, British economist warnings have proven prophetic. After surveying the state of banking in the country, it is not for the faint-hearted that in 1913, John Maynard Keynes wrote in Indian Currency and Finance-
“In a country so dangerous for banking as India, (it) should be conducted on the safest possible principles”.
Bank frauds and bank crises have been an intrinsic part of Indian financial history. In fact frauds in India existed before Keynes’s warnings.
Which leads one to ponder upon: what is going on Indian banking?
The answer is: nothing new.
At least momentarily but the Punjab National Bank (PNB) scam has shaken the country. Few headlines indicate that since independence, it is the biggest banking fraud.
Fraud is any unfair act and disreputable behavior by which one person gains or aspires to gain advantage over another person. Fraud creates loss to the victim directly or indirectly. Fraud has not been stated clearly in The Indian Penal Code but sections have been discussed that are dealing with cheating, concealment, forgery counterfeiting and breach of trust that leads to the act of fraud.
What statistics say?
As per the compilation of analysis by the Reserve Bank of India, in every four hours one banker is caught and punished for being involved in fraud.
About 5,200 officials of public sector banks have been punished for fraudulent between January 1, 2015 and March 31, 2017.
Accounting to 12 % of the cases among the total number of frauds, 2,084 cases saw the involvement of insiders. But the data does not show that how much money was involved in the frauds execute by the employees.
CORRUPTION IN BANKS
Public Sector Bank Staff punished for committing fraud
BANK 2015
(JAN-DEC) 2016
(JAN-DEC) 2017
(JAN-MAR) TOTAL
State Bank of India 888 547 103 1538
Indian Overseas Bank 245 160 44 449
Central Bank 248 130 28 406
Union Bank 125 72 17 214
Punjab National Bank 115 58 11 184
22 OTHER PSB’s 1127 1027 255 2409
TOTAL 2748 1994 458 5200
Frauds in 76 banks and cases with insider involvement
2013-14 2014-15 2015-16 2016-17 TOTAL
No. Of Frauds 4,305 4,639 3,870 17,504 17,504
Amount
(Rs. Cr.) 10,170 19,455 18,691 17,750 66,066
No. Of Cases With Staff Involvement 501 551 582 450 2,084
From the experts opinion
“These employees have been convicted, awarded penalties, including dismissal from service.” -The RBI document states.
“…There should be multiple levels of authentication… But the Indian banking system is extremely hierarchical … If the manager says something must go through, nobody says that it must need a second review, which is a risky way of running things.” – Bikash Gangadharan, a senior manager with a multinational bank
“It is obvious that banks have not been able to identify and take proactive steps to mitigate known risks. This makes it hard to pinpoint who is involved. The top management is definitely at fault for failing to put in place a clear compliance strategy.” -Tobby Simon of Synergia Foundation, a multi-Disciplinary Think Tank
Comparative view Under UPA 2 & NDA
Prasenjit Bose who is an economist was shocked to learn the details of losses and loan frauds faced by Indian Banks in the last 10 years when he received the reply by the Reserve Bank of India for the RTI filed by him.
Bose got to know that the number of bank frauds had risen from Rs 1,542.8 crore (Rs 15.42 billion) in 2008-2009 to Rs 22,469.6 crore (Rs 224.69 billion) in 2017-2018.
“It is really surprising that there is no crackdown happening on loan frauds. Generally, NPAs happen when one takes a loan and fails to repay, but not wilfully, and it is not a criminal act. But in the case of a loan fraud, it is criminal intent. Like the Nirav Modi case. To begin with, the plan was to rip off the public sector banks. And this is not specific to limited public sector banks only. There is a racket going on and it is too big to ignore. Last year Rs 20,000 crore (Rs 200 billion) was ripped off from the banking system.” – Prasenjit Bose
The average amount involved in loan related fraud was more than Rs. 75 lakh and it increased to Rs. 9 crore in 2017-18, as per the data revealed by Reserve Bank of India.
“Since the publication of data, a lot of people who are favorably disposed towards the Modi government are making the point that this is the data on detection. They are saying these loans may have originated under the UPA time, but have been now caught by the Modi government. That is the official argument.” – Prasenjit Bose
“But if one uses common sense, then you will find out that the RBI had already revised its guideline in 2016 on loan frauds. It has crossed Rs 20,000 crore each year after 2016. From April 2014 to March 2018, Rs 77,000 crore (Rs 770 billion) worth of bank loan frauds took place under the Modi government.” – Prasenjit Bose
Fraudsters Robbed you
On June, 26, 2018, the Reserve Bank of India released the financial stability report (FSR) that states that, alone in the fiscal year 2018, over 6,000 cases of frauds have been registered which caused the total loss of more than Rs. 30,000 crore ($4.37 billion).
According to a report by Institutional Investor Advisory Services which is a proxy advisory firm states that in the previous financial year (2017), banks reported 12,533 cases of fraud causing to losses of Rs18,170 crore. Here we bring you recent fraud cases in India with banks:
Lately exposed fraudulent involving second-largest public sector bank PNB has caused a stir in the banking industry. Fraud by renowned jewelers Nirav Modi and three other jewelers of Rs 11346 crore are may be the biggest banking scam till date. RBI has regulated PNB to pay entire Rs 11346 crore to the lenders or in financials of the banks it may lead to turmoil. The country’s second-biggest state-run lender said in February that it had been deceived of about Rs. 12,954 crore by celebrity jeweler Nirav Modi and his uncle Mehul Choksi, owner of Gitanjali Gems.
In Rs 836-crore fraud for violating laws for sanctioning amounts CBI arrested the Former Head of Pune Zone of Maharashtra bank on 20th July 2017. Credit facility had been sanctioned by the head to a logistic company on basis of false documents and issued loan to 2,802 drivers for purchasing trucks.
For being defaulters in loans payment the promoters of a mining company Abhijeet Group were arrested on 13th June, 2017, in loan payment of over Rs 11,000-15,000 crore through 132 shell companies of the group, from 20 banks and financial institutions. Vehicle company was created namely Jas Infrastructure to provide contract for erection, procurement and construction of a power plant at Bihar by Abhijeet group to its group company Abhijeet Projects and misapplying loan amounts worth Rs 790 crore from Canara Bank and Vijaya Bank .
Promoter of the Kolkata-based Shree Ganesh Jewellery House Nilesh Parekh, was arrested on 8th May, 2017, in connection with loss of Rs 2,223 crore to association of 25 banks led by the State Bank of India. So as to escape the recovery of import finance the accused was using the import finance from one bank and export finance from another bank.
The formalities of a bank are so complex hand rigid that one cannot trespass it easily. When a person transacts even Rs. 100 the text message is a proof that circulates. Then how is it possible for such an enormous amount to have been robbed? That definitely puts an insider into the circle.
For an instance when a person who has an account in SBI gives check to another person who has an account in PNB, the while transacting the money it’s obvious that the information is circulated among both the banks. Not only these two but you will be shocked to know that each and every bank has plenty of information about the customer. Then how one can even conspire about robbing that huge amount in this digital era.
Where in the one hand our Prime Minister say that India is totally being converted to Digital India then how these frauds escaped the brilliant technology. Where are we basically lacking behind? Who is going to take the responsibility of those money that vanished?
How your pocket is on fire?
A book called The Scam written by the journalists, Debashish Basu and Sucheta Dalal, involves cases: From Harshad Mehta to Ketan Parekh. They later revised it with the title Also Includes JPC Fiasco and Global Trust Bank Scam. It’s feared that they will have to keep revising the title because this miserable nation seems to have no shortage of humongous banking frauds.
“The scam was so gigantic that it was easy to lose perspective — larger than the health budget, larger than the education budget, it made millions of rupees look like loose change. As the stock prices started crashing all over the country, following the most explosive and absurd rise over the previous six months, the scam — fifty times the size of Bofors — invaded middle-class homes like a whirlwind.” – Of the Harshad Mehta matter, Mr Basu and Ms Dalal wrote
Recently Nirav Modi have joined the checklist of smart young Gujarati men, involving Harshad Mehta, Hiten Dalal, Jatin Mehta and Ketan Parekh, each of whom has taken thousands of crores from taxpayers in the last few years. Taxpayers are being used because though the money disappeared from public sector banks, it is the citizen’s money that is being robbed.
India is a country where maximum number of population is illiterate, hundreds of patients die in the hospital due to lack of facilities, plenty of them suffer from different deadly diseases due to defecating in the open as there are not enough toilets in the vicinity. You must be wondering that why this simple thing is being conveyed to you? Because vigilant citizens these are the infrastructures that needs to be availed to the public by the government, making the tax money in use. But instead our banking system chose to allow the fraudsters to rob it.
The question arises that basically where is the loophole in the authorities’ alertness that such incidents are taking place? How is it possible that authorities don’t even have a hint that such an event is being aspired? How is it even possible that such humongous amount is being defrauded by the people and no one has an idea about it? Is the government taking the necessary steps required? How the taxpayer is supposed to get his blood earned money back? How India can be declared as a developed Nation with such actions being conspired on a regular interval of time?